The Amazing Cave-In

Posted Tuesday, December 7, 2010, at 10:44 PM
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  • Why don't you be an example to all liberals and turn you entire life over to the government from the fruits of your labor to your health. The one thing that most liberals do not get is that the last two years of liberal control was REJECTED at the ballot box this past November. Mike, sadly you may need to get used to this type of caving by the Democratic Party if they intend to even be around, as this country is mostly conservative. By the way the "rich" create jobs, as a lot of small businesses will benefit from their taxes not being raised. The poor throw their money back into the economy, what a crock. They are just paying it back to where it originally came from. The redistribution of wealth is the only way the poor gain income with your plans. I truly pray your mental wellbeing over the next couple of years, because for liberals this is going to be painful.

    -- Posted by sleeper on Wed, Dec 8, 2010, at 6:28 AM
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    You would have a point sleeper if anything passed over the last two years were even remotely liberal. Liberal control? Over what? The only reason Democrats had control of either house was because of Blue Dogs (Conservadems) and they were largely voted out of office.

    I know you like to believe that Obama is a liberal, but he isn't. Not even close.

    "By the way the "rich" create jobs, as a lot of small businesses will benefit from their taxes not being raised."

    Well that's great except that has never been the problem. Under either tax plan taxes were never going up on most small businesses. The "rich" don't create jobs. Businesses create jobs and right now they have no reason to create jobs. They are making record breaking profits right now, so they have no reason to create jobs.

    "as this country is mostly conservative."

    Actually this country is mostly moderate, not liberal and not conservative.

    "I truly pray your mental wellbeing over the next couple of years, because for liberals this is going to be painful."

    Save your prayers for the country. Our government is gridlocked. The next two years are going to be painful for most Americans.

    "They are just paying it back to where it originally came from."

    You are absolutely correct, they are throwing their money right back into the economy, where it originally came from.

    -- Posted by MichaelHendricks on Wed, Dec 8, 2010, at 8:06 AM
  • I'll take government gridlock any day over the stuff this government has done over the past two years. Liberals in denial and this is now getting to be hilarious to see how you react when Obama turns on his base to save his political career.

    -- Posted by sleeper on Wed, Dec 8, 2010, at 8:48 AM
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    I'm sure it must be incredibly disheartening to see that the President who promised Hope and Change has had to face the political realities of today.

    -- Posted by SWNebr Transplant on Wed, Dec 8, 2010, at 8:53 AM
  • A couple owning a small business that takes in $250k is pulled into that "rich" category when anyone who knows anything about small businesses, knows that they are actually a middle class couple. Rich people do create jobs because a person operating their own business can make a million dollars and still have their taxes linked to their business. You can't separate the person from the business when they are linked by the tax code.

    When the rich spend on indulgences, who provides those services? When a rich person buys something, there is usually a low-middle income person hired to provide that good or service to them. Expensive restaurants, employees that manufacture private jets, yachts, RVs, etc. or the people who build their mansions, maintain their yards. They still buy gas and food like everybody else. They buy computers, stereos, tvs, video games, cars and other products just like everyone else except they are more likely to put more money towards those things.

    It's ignorant to say the middle class spur job growth because of what they buy but what the rich people buy doesn't spur job growth. Also, if they are saving their money then it is either going to several different banks, treasury bills or investments. All of these things are good for the economy and the nation. The more money people put in banks the better financial footing the bank has which contributes to their ability to expand to more branches and hire more employees in the process. Treasury bills bought within our borders by our own citizens are a lot better for us than China or some other foreign country. Investments are always a positive boost to the economy because it strengthens the market.

    This economy is so much more complex than the argument that the rich or the middle class do or don't spur job growth. That is a political argument with no basis of fact in how our economy actually works. People who argue that are more interested in their politics than facing the reality of how the world really works. Rich and middle class earners both spur job growth and we need both of them. That's why extending the tax cuts for both was a good idea.

    The deficit is determined by the revenue the government takes in minus the expenses. It all starts with the people who actually make the money. What they send you is what you have to work with and if you spend more than they give you then you don't take more from them and blame THEM for the deficit if they don't want to give you more. The government is to blame for not operating within the revenue that the people sent to them and it's their responsibility to get their spending in line with the revenue. The problem is that government spending increases at a rate greater than what revenues can pay for. That's why I believe in a Constitutional Amendment that requires a balanced budget every year like Nebraska's Constitution requires. We have shortfalls projected in our budgets. That's when we go in and make cuts or reductions where we need to, in order to maintain a balanced budget. Our state is also much better off than a lot of the other states because we can operate within our budget.

    -- Posted by McCook1 on Wed, Dec 8, 2010, at 11:06 AM
  • Judging by the unemployment i keep hearing about I keep wondering, "where are all the jobs that the tax cut is creating"?

    -- Posted by president obama on Wed, Dec 8, 2010, at 12:03 PM
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    Perhaps the tax cuts have saved or created millions of jobs, but there can be no verification beyond what people say. We all have to rest assured that the unemployment rate would be far higher if those tax cuts hadn't been in place. ;)

    -- Posted by SWNebr Transplant on Wed, Dec 8, 2010, at 12:21 PM
  • If Freddy and Fannie had been shut down a few years back, when both McCain and Bush attempted it, the housing crash caused by the Democrat's Community Reinvestment Act might have been forestalled. We'll never know how much better shape our country could have been without the Democratic enforcement of a policy that forced lenders to find ways to loan money to people that couldn't afford their homes.

    It was ironic enough to be very funny when the media first started printing stories exposing the fact that the largest number of foreclosures were happening to minorities. Evidently, someone finally connected the dots because those stories disappeared within a few days. Can't let the sheeple find out their Democratic Plantation Owners set them up.

    As is, the timing was perfect. President Bush managed to stave off a collapse after 9-11, but the Democrats CRA-caused housing bubble burst just in time for them to take power again...and prove to the entire nation that they have no clue how to handle money, business, or a free country.

    -- Posted by MrsSmith on Wed, Dec 8, 2010, at 3:24 PM
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    Please, sleeper, give some examples instead of the blanket statement of what the Liberals have done over the last two years. I guess you don't like the deficit going down over the last two years which has happened.

    -- Posted by MichaelHendricks on Wed, Dec 8, 2010, at 4:37 PM
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    "Perhaps the tax cuts have saved or created millions of jobs, but there can be no verification beyond what people say. We all have to rest assured that the unemployment rate would be far higher if those tax cuts hadn't been in place."

    So basically your point is maybe the tax cuts crated jobs maybe they didn't but there is no proof. But the tax cuts didn't cost any jobs. And your proof is?

    -- Posted by MichaelHendricks on Wed, Dec 8, 2010, at 4:39 PM
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    Oddly enough MrsSmith the facts don't back up your claim that Bush staved off a collapse after 9-11. The unemployment rate was already on the rise when 9-11 happened and that rate continued to rise until the end of 2003. The Bush Tax Cuts went into effect in 2001.

    To that point, the myth of the beginnings of the housing bubble have also been questioned. Yes house sales began going up with Fannie and Freddie in the late 90s but did not really explode until late 2003 into 2004 (right at the same time that the unemployment rate began to drop.

    So Democrats don't know how to handle money? Well I guess that explains why the deficit drops while a Democrat is in office yet goes up when a Republican is in office.

    -- Posted by MichaelHendricks on Wed, Dec 8, 2010, at 4:55 PM
  • Didnt the financial deregulation that was passed by the republicans have something to do with it too?

    -- Posted by president obama on Wed, Dec 8, 2010, at 5:05 PM
  • The financial deregulation was related to the derivatives of these high risk loans to low income borrowers. Before the government required these high risk loans to be made there was very little money to be found in the derivative market because only a very small percentage of all loans were high risk loans. When high risk loans flooded the market and that percentage skyrocketed and they were to be sold like most mortgages are, the banks were unable to sell them at a profit and if they were forced to hold onto these loans then they would have faced a similar financial crisis, it just would have happened sooner. What the deregulation did was allow the banks to play hot potato with these high risk loans except someone is left holding it when it explodes. If they didn't deregulate, the banks would still have been holding onto these hot potatoes when they exploded. The final result would have been the same though, a financial crisis caused by a federal requirement for lenders to make high risk loans to low income borrowers.

    The problem was that Republicans thought deregulation of this market was the fix but it was barely a band-aid that only delayed the inevitable. What they should have done was stop requiring banks to make high risk loans but that wasn't only politically unpopular, it was most likely politically impossible because they would have been called racist or cruel because it would be repealing a program enacted under the banner of "providing homes to minorities and low income families". However, when you issue a loan based on anything except financial ability to repay then you are engaging in careless risk taking except in this case, those foolish risks were required by federal law to be made by the lenders. That same law is still in effect too. If the law is not changed then we will see this happen again.

    -- Posted by McCook1 on Wed, Dec 8, 2010, at 6:49 PM
  • Since 2007, when the Democrats took over the House, which controls spending, more than 5 Trillion has been added to the deficit. You are living in fantasy world if you think that the deficit has gone down over the past two years. Like I said watching liberals over the next few years will be entertaining.

    -- Posted by sleeper on Wed, Dec 8, 2010, at 8:29 PM
  • Americans in poll after poll have said they do not want the tax cuts extended to the rich. Obviously they are not polling enough of the rich.

    I Just finished reading Huey Long by T Harry Williams. Huey did do a tremendous amount for the poor in Louisiana and had to fight the rich and Standard oil to get what he needed as governor.He built roads and bridges and before he was elected school kids had to buy there own books, this was only a few of the things he did. Once he became a senator, he ran on the share the wealth platform. I think he invented it. Franklin D Roosevelt was very worried about this senator evan though they shared the same political party. Had he not been assassinated he might have become our president, he was very popular with the poor, and most people were poor because it was the great depression at that time He was the closest thing to a dictatorship in American history. Even though they were in different political party's he was friends with George W Norris of Nebraska.

    It's a good read, but very long

    -- Posted by Keda46 on Wed, Dec 8, 2010, at 9:49 PM
  • Yeah sleeper, before that the republicans did. Everytime somemeone mentioned the debt all you could hear was, "we are in 2 wars and you dont support the troops". Where is that rhetoric now? The war that the previous administration got us into is not cheap.

    -- Posted by president obama on Thu, Dec 9, 2010, at 6:40 AM
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    You have no sense of humor, didn't you notice I was using the stimulus justification. You're always so grumpy and serious.

    -- Posted by SWNebr Transplant on Thu, Dec 9, 2010, at 8:02 AM
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    Thought this was pretty interesting. The recent comments by many people have left me wondering if people actual know what the definition of treason is.

    -- Posted by Damu on Thu, Dec 9, 2010, at 9:27 AM
  • Bigdawg, Yes the Republicans did add to the deficit but that is nothing compared to the Democrats since 2007. We just differ in what the role of the government should be. You feel that deficit spending for entitlements is more justified than national security. That is fine. That is the beauty of this country you can still make these arguments.

    By the way I feel you are way too intelligent to be a liberal. Do you own a small business by chance?

    -- Posted by sleeper on Thu, Dec 9, 2010, at 12:16 PM
  • Mrs. Smith

    Nice to meet you.

    Before beginning my comments I would like to provide you with a quote from the Senate Congressional Oversight Panel Jan. 2009 "Special Report on Regulatory Reform", the executive summary Chapter 1, Part 1, titled "Lessons from the Past".

    Financial crises are not new. As early as 1792, during the presidency of George Washington, the nation suffered a severe panic that froze credit and nearly brought the young economy to its knees. Over the next 140 years, financial crises struck on a regular basis--in 1797, 1819, 1837, 1857, 1873, 1893--96, 1907, and 1929--33--roughly every fifteen to twenty years.

    But as the United States emerged from the Great Depression, something remarkable happened: the crises stopped. New financial regulation--including federal deposit insurance, securities regulation, and banking supervision--effectively protected the system from devastating outbreaks. Economic growth returned, but recurrent financial crises did not. In time, a financial crisis was seen as a ghost of the past.

    After fifty years without a financial crisis--the longest such stretch in the nation's history--financial firms and policy makers began to see regulation as a barrier to efficient functioning of the capital markets rather than a necessary precondition for success.

    This change in attitude had unfortunate consequences. As financial markets grew and globalized, often with breathtaking speed, the U.S. regulatory system could have benefited from smart changes. But deregulation and the growth of unregulated, parallel shadow markets were accompanied by the nearly unrestricted marketing of increasingly complex consumer financial products that multiplied risk at every stratum of the economy, from the family level to the global level. The result proved disastrous. The first warning followed deregulation of the thrifts, when the country suffered the savings and loan crisis in the 1980s. A second warning came in 1998 when a crisis was only narrowly averted following the failure of a large unregulated hedge fund. The near financial panic of 2002, brought on by corporate accounting and governance failures, sounded a third warning.

    The United States now faces its worst financial crisis since the Great Depression. It is critical that the lessons of that crisis be studied to restore a proper balance between free markets and the regulatory framework necessary to ensure the operation of those markets to protect the economy, honest market participants, and the public.

    There are many factors that came together and led to the housing boom and following bust. I respect your opinion but it seems to lack some of those pesky little things we call facts. Can you provide some form of documentation that proves the CRA forced lenders to find ways to make questionable loans; when in fact the laws in place at the time do not seem to support that position?

    Title VII of CRA Sec. 802 (b) - It is the purpose of this title to require each appropriate Federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions.

    This is also well documented in U.S. Code: Title 12, Chapter 3, Subchapter VII, 301

    301. Powers and duties of board of directors; suspension of member bank for undue use of bank credit.

    Every Federal reserve bank shall be conducted under the supervision and control of a board of directors. The board of directors shall perform the duties usually appertaining to the office of directors of banking associations and all such duties as are prescribed by law.

    Said board of directors shall administer the affairs of said bank fairly and impartially and without discrimination in favor of or against any member bank or banks and may, subject to the provisions of law and the orders of the Board of Governors of the Federal Reserve System, extend to each member bank such discounts, advancements, and accommodations as may be safely and reasonably made with due regard for the claims and demands of other members banks, the maintenance of sound credit conditions, and the accommodation of commerce, industry, and agriculture.

    The Board of Governors of the Federal Reserve System may prescribe regulations further defining within the limitations of this chapter the conditions under which discounts, advancements, and the accommodations may be extended to member banks.

    Each Federal reserve bank shall keep itself informed of the general character and amount of the loans and investments of its member banks with a view to ascertaining whether undue use is being made of bank credit for the speculative carrying of or trading in securities, real estate, or commodities, or for any other purpose inconsistent with the maintenance of sound credit conditions; and, in determining whether to grant or refuse advances, rediscounts, or other credit accommodations, the Federal reserve bank shall give consideration to such information. The chairman of the Federal reserve bank shall report to the Board of Governors of the Federal Reserve System any such undue use of bank credit by any member bank, together with his recommendation. Whenever, in the judgment of the Board of Governors of the Federal Reserve System, any member bank is making such undue use of bank credit, the Board may, in its discretion, after reasonable notice and an opportunity for a hearing, suspend such bank from the use of the credit facilities of the Federal Reserve System and may terminate such suspension or may renew it from time to time.

    The oversight regulations were already in place to prevent the Bubble from bursting -- President Bush and Senator McCain's concern was misdirected if not politically motivated. It was not the Federal Reserve System or Fannie or Freddie that failed; it was those that had oversight responsibility ignoring their sworn duties. You can't transfer blame to the originators of the policy when those in charge of administering that policy did not perform their sworn duties. That is like trying to blame the manufacturer of your automobile for the accident you had because you didn't turn your headlights on when it got dark.

    The CRA was made law in 1977 and performed quite well until the Banking Industry began heavy utilization and promotion of the Deferred Interest Rate Concept in the early 2000's. That is over 20 years of proven performance under 2 republican and 2 democratic administrations without causing any significant impacts to our economy -- how do you explain that?

    I have been involved in the residential, commercial, and industrial development industries throughout our great country for over 40 years in a professional capacity. During this time span I formed many long lasting business relationships with the banking industry, developers, real-estate companies, and governmental agencies at every level of jurisdiction - local, state, and federal.

    Every housing boom that I had personally seen unfold has been due to good economic times creating a surplus of personal wealth. Beginning in the late 60's through the 70's Alaska experienced such a housing boom. During the development of the Prudhoe Bay Oilfields and construction of the Trans-Alaskan Pipeline system everyone was making good money and the economy prospered accordingly. In 1975 the cost of a one bedroom apartment in Anchorage could run nearly a thousand dollars, if you were lucky enough to find one available.

    This expansion continued until the completion of construction, at which point many workers began losing their jobs and moving elsewhere to secure employment. This created an excess of housing on the market due to lack of demand, and during the early to mid 80's Alaskas housing market suffered miserably -- along with the general economy of the state.

    In the late 80's to mid 90's there was a housing boom in Southeast Idaho due to the expansion of projects at the Idaho National Engineering Laboratories, prompted again by a surplus in personal wealth. Of course most people are aware that booms spawned by cyclical construction projects can not necessarily be relied on for long term investments unless spin-off industries develop to maturity to support the economy in slow times.

    The housing boom that created our current sad state of affairs did not even resemble anything I had ever seen before. It was not prompted by an excess of personal wealth, it was prompted by an excess of greed. The mortgage backed securities were in such demand in the market place that wall street pressured the banking industry to lower their loan requirements to allow more securities to enter the market.

    Following is a more defined statement by Ben Bernanke:

    Saving inflows from abroad can be beneficial if the country that receives those inflows invests them well. Unfortunately, that was not always the case in the United States and some other countries. Financial institutions reacted to the surplus of available funds by competing aggressively for borrowers, and, in the years leading up to the crisis, credit to both households and businesses became relatively cheap and easy to obtain. One important consequence was a housing boom in the United States, a boom that was fueled in large part by a rapid expansion of mortgage lending. Unfortunately, much of this lending was poorly done, involving, for example, little or no down payment by the borrower or insufficient consideration by the lender of the borrower's ability to make the monthly payments. Lenders may have become careless because they, like many people at the time, expected that house prices would continue to rise--thereby allowing borrowers to build up equity in their homes--and that credit would remain easily available, so that borrowers would be able to refinance if necessary. Regulators did not do enough to prevent poor lending, in part because many of the worst loans were made by firms subject to little or no federal regulation.

    Your following statement:

    It was ironic enough to be very funny when the media first started printing stories exposing the fact that the largest number of foreclosures were happening to minorities. Evidently, someone finally connected the dots because those stories disappeared within a few days. Can't let the sheeple find out their Democratic Plantation Owners set them up.

    I find this statement a little confusing in the fact that you don't realize that all groups were being manipulated by the same method. Without someone signing on the dotted line the whole scheme would not have been able to materialize, it just happened that those minorities you refer to, seen this as the best opportunity to ever own their own home.

    Your following statement:

    As is, the timing was perfect. President Bush managed to stave off a collapse after 9-11, but the Democrats CRA-caused housing bubble burst just in time for them to take power again...and prove to the entire nation that they have no clue how to handle money, business, or a free country.

    President Bush was indeed able to stave off a collapse after 9-11 but I sure wouldn't be proud of the method he used to accomplish it. Most wars are funded by tax increases for that specific purpose, neither the Afghanistan nor Iraq wars were handled in this manor. How were these wars funded? I will give you one example, the rest you can research for yourself.

    In 2007 I was researching this very issue and ran across an interesting Request for Cancelation of allocated funding by President Bush. It involved transferring of funds from nearly every branch of government to fund the BRAC (Base Realignment and Closure Program). The 1st letter, to Speaker of the House Nancy Pelosi contained only reference to the funds being used on BRAC. However, the 2nd letter, from the Office of Management and Budget to the President clearly shows that the true intent was to fund the War on Terror.

    Dear Madam Speaker:

    I ask the Congress to consider the enclosed FY 2007 request to cancel $3.1 billion of funding from lower-priority Federal programs and excess funds. This request would offset fully the funds needed to address the $3.1 billion FY 2007 funding shortfall for the Department of Defense to implement the recommendations of the 2005 Base Realignment and Closure Commission. The proposed cancellations would affect the Departments of Agriculture, Commerce, Education, Energy, Health and Human Services, Housing and Urban Development, the Interior, and Transportation, as well as the Corps of Engineers.

    The President

    The White House

    Submitted for your consideration is an FY 2007 request to cancel $3.1 billion of funding from lower-priority Federal programs and excess funds. These proposals would offset fully funds needed to address the $3.1 billion FY 2007 funding shortfall for the Department of Defense (DOD) to implement the recommendations of the 2005 Base Realignment and Closure (BRAC) Commission. These funds are necessary for DOD to continue scheduled redeployments of military personnel and their families from overseas stations to the United States and support the training, mobilization and deployment of military forces in support of the Global War on Terror. In addition, these funds are required to maintain the legislated schedule for BRAC realignments and closures, which is important to communities that have already made specific plans and commitments.

    I wonder how those communities compensated for the lack of those funds? I bet there wasn't any housing booms around there for a while.

    The complete document is available in PDF format from the OMB.

    I hope none of my comments have offended you in anyway, if I have I sincerely apologize. That was not my intent.

    Best Regards

    -- Posted by Geezer on Thu, Dec 9, 2010, at 7:34 PM
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    Geezer - your personal experience in the US housing market aside...a recent study conducted by the America Sociological Review and published in their journal in October disagrees with your "boom or bust" conclusions.

    The ASR is a very liberal publication and has spent great resources finding out that from the 1990's (the era of Clinton...I believe?) to the bubble burst in 2007 - lending in the subprime market was overwhelmingly slanted toward minorities. ASR lamented this practice as being 'predatory'. I would say it was mandated, and that once the bubble "burst" it was quickly covered up by those in charge of Fannie and Freddie. I won't drop names, but it's easy to find out who that was.

    Upon a very general and gentle review of Clintonian policies relating to Fannie, Freddie, and other federal banking and lending policies - one finds the federal mandates implemented by the Carter administration and stepped up by the Clinton administration. (announced by Janet Reno) I would provide you links...but with your intellect and the obvious amount of time you have to conduct internet research...I'll bet you can find it just as easily as I did.

    The trick is whether or not you will believe something that pokes holes in your ideology.

    -- Posted by Mickel on Sun, Dec 12, 2010, at 9:37 PM
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    The even more amazing thing is that you found a way to solely blame only the two Democrats that held office between 1976 and 2000. Somehow the three Republicans (two of which served 2 terms) get a complete pass with your logic, including George W. Bush, who was president during the last housing bubble.

    -- Posted by MichaelHendricks on Sun, Dec 12, 2010, at 10:44 PM
  • I dont have time, could you provide the link for me?

    -- Posted by president obama on Mon, Dec 13, 2010, at 6:51 AM
  • Mickel

    The article you reference is outstanding -- did you read the full article? I have included the link for everyone -- it is definitely worth reading.

    The advent of securitized mortgages transformed what had been a bank-based intermediary credit system into a securities based market system (Dymski 2002). In so doing, the new financial instruments vastly expanded the pool of money available for lending. Under traditional systems of lending, the number of mortgages was limited by the amount of deposits a bank had on hand to lend. Under the new system, the volume of mortgages was no longer limited by deposits, but by the number of potential borrowers and investors' willingness to purchase mortgage-backed securities. The new arrangements thus created a demand on the part of banks to expand the pool of borrowers.

    Because virtually any mortgage, however shaky, could be sold and repackaged as part of a collateralized debt obligation, risky borrowers who were formerly shunned by lenders suddenly became quite attractive. The resultant wave of predatory lending was spearheaded by independent mortgage brokers who did not bear the risk of their reckless lending practices. They simply generated mortgages and immediately sold them to banks and other financial institutions, which in turn capitalized the shaky subprime instruments as securities and sold them to thirdparty investors who ended up assuming the risk, typically in ways they neither appreciated nor understood (Engel and McCoy 2007; Lewis 2010; Peterson 2007). These lucrative subprime lending and securitization practices did not suddenly appear ''at the fringes of finance,'' but were produced and legitimated by the financial industry using new, high-tech tools such as credit scoring, risk-based pricing, securitization, credit default swaps, and variable rate mortgages that were billed as rational, scientific, and safe (Langley 2008, 2009; Stuart 2003).

    Second, the crisis cannot be attributed to riskier lending engendered by the Community Reinvestment Act (CRA). Using a regression discontinuity design, Bhutta (2008) examined lending rates just below and above the CRA neighborhood income cutoff and found that while CRA oversight did increase lending in targeted areas, unregulated lending activity also increased substantially in the same places. Only 6 percent of subprime loans were made to low-income borrowers or individuals in neighborhoods subject to CRA oversight, and less than 2 percent of loans that originated with unregulated independent mortgage brokers were CRA credit-eligible (Bhutta and Canner 2009).

    How more specific does one need to be than to realize that only 6 percent of all subprime loans were made under CRA oversight and only 2 percent of loans that originated with unregulated independent mortgage brokers could even qualify for loans under CRA criteria. The CRA program did not cause the housing bubble to burst.

    Although lending standards often left much to be desired, it appears that ongoing racial segregation, discriminatory lending, and an overheated housing market combined to leave minority group members uniquely vulnerable to the housing bust. As Immergluck (2009) wryly notes, financial literacy and creditworthiness did not suddenly plummet on the eve of the crisis--home prices did. At the same time, although CRA regulations stimulated lending to minority households in low-income neighborhoods, the increase was not nearly enough to bring about the housing crisis (Bhutta and Canner 2009; Park 2008).

    -- Posted by Geezer on Mon, Dec 13, 2010, at 2:42 PM
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